Group LTD: Executives get short end of stick

By National Underwriter

National Underwriter

By Emily Holbrook

Most (83 percent) employers who offer group long-term disability (LTD) insurance to employees feel the amount of base coverage is adequate. However, gaps exist in coverage for executives. Even with this acknowledged exposure, only 15 percent of these companies plan to change their group LTD programs.

That's according to a new report by Massachusetts Mutual Life Insurance Company (MassMutual) and the Society for Human Resource Management (SHRM). The "2013 Employer Perspectives on Disability Benefits" lists findings from surveys of more than 44,000 SHRM members regarding their company's long-term disability and executive benefits programs. The results show many executives underinsured.

“Not only are many executives at risk, but so are their families,” said Melissa Millan, senior vice president, worksite insurance, MassMutual. “We commissioned this study to help employee benefits executives and benefits managers benchmark their disability insurance plans more effectively, and help lead organizations to fully informed recommendations and decisions.”

Among other discoveries, the study found that:

Typically, base group LTD plans (78 percent) do not cover variable compensation, such as bonuses and commissions, which is a compensation structure more commonly offered to high-ranking and C-suite executives; and only 21 percent of organizations indicated that they offer "buy-up" coverage.

Almost one-third of companies (29 percent) expressed concern that high earners with income in excess of the plan limit are not adequately covered.

Only 19 percent of survey respondents indicated that they offer supplemental individual disability income insurance coverage.

“This study provides valuable insights and perspectives that may have not been available to employee benefits executives and benefits managers before,” said Millan. “Clearly, considering and addressing the shortfalls is the place to start.”